IMF Warns Ukraine Bailout May Need "Significant Recalibration"

Mike Shedlock

5/2/2014 12:01:00 AM

Armed men stormed the Donetsk regional prosecutors’ office today, throwing stones and stun grenades. “The government doesn’t control the situation in Donetsk as well as part of the Donetsk region,” acting Ukrainian President Oleksandr Turchynov said yesterday in Kiev. “Because there is a real threat of Russia starting a continental war, our army is on full combat alert.”

The IMF, which approved a $17 billion bailout for Ukraine early today, said “a significant recalibration of the program” might be required if the situation worsens.

Premier Arseniy Yatsenyuk said yesterday that Ukraine is ready to offer “additional guarantees” for Russian speakers, which the government in Moscow says are at risk after Putin-backed President Viktor Yanukovych was ousted in February.

Earlier, about 2,000 demonstrators marking the May day holiday marched through Donetsk, chanting “Rossiya” and demanding the release of Pavel Gubarev, the protesters’ imprisoned “people’s governor” in the region.

Separatists in the Donetsk and Lugansk regions plan to hold a referendum on May 11 on the creation of a ‘Donetsk people’s republic’. Kiev authorities oppose the vote, which they say would be illegal under Ukrainian law.

Ukraine’s interim authorities launched an operation against the rebels in the east last week, which has made little apparent progress. Ukrainian army, interior ministry and police forces have set up or reinforced checkpoints around the regional rebel headquarters of Slavyansk, but made no attempt to enter the town, and faced criticism for the ineffectiveness of the operation.

Hryvnia vs. US Dollar

At the beginning of the year the hryvnia traded at 8.21 per US dollar. It now trades at 11.55 per dollar, a decline of 28.9%. On April 14, it traded at 13.16 to the dollar, a decline of 37.6%.